Hopes that Zimbabwe would become an attractive investor destination under President Mnangagwa are fading as the country counts the costs of January’s fuel price protests.
As Zimbabwe struggles to recover from January’s fuel price protests, there seems to be little hope of an end to the country’s economic crisis.
On 12 January the government more than doubled the price of fuel.
Large-scale protests broke out, causing widespread damage to shopping complexes, small enterprises and urban infrastructure, particularly in the low-income neighbourhoods of major cities.
Weeks later, piles of ash still litter torched shops and vandalised traffic lights mark busy road intersections.
With sharp increases in the cost of basic goods and services, some businesses are unlikely to recover from their losses.
Sarudzai Hanya, who owns a supermarket and building in Emakhandeni, a township in the industrial second city of Bulawayo, where protesting crowds broke into shops and markets, told African Business she has no hope of resuscitating her store.
“We lost so much stock and equipment, our fridges and tills were stolen, so there’s no way we can revive our business. Our best option is to repair the damages and find someone who is willing to rent our shop. We can’t restock, not anymore,” she said.
Impact on retail sector
The government has established an emergency fund to assist businesses affected by the looting, but local economist John Robertson said that he was doubtful of the government’s ability to compensate businesses across the different economic sectors.
“Most of the losses were in the retail sector, but there are thousands of people in the informal economy whose claims the government might not recognise.
“A formal business might be buffered by insurance claims, but it’s unlikely informal businesses have an alternative resort,” he said.
Among the biggest losers, Choppies Enterprises, a Botswana-based supermarket chain that has expanded to Zimbabwe, suffered damage to nine of its stores, with stock and equipment valued at $9m looted or damaged during the protests.
Although evaluations of the cost of the damage and long-term impacts are still incomplete, the Confederation of Zimbabwe Industries estimates overall losses to the economy could be as high as $300m in trade, production and stocks.
In response to three days of chaotic demonstrations, security forces launched a crackdown which saw over 1,000 activists and ordinary citizens, including minors, arrested on various charges of public violence, theft and subversion of the state.
Twelve protesters were reportedly shot dead during the protests and allegations of assault on civilians during night raids by security forces have drawn strong global condemnation.
Robertson says the government’s denial of responsibility for the abuses has caused further damage to the country’s reputation.
The US, which has maintained targeted sanctions against officials and entities linked to the ruling Zanu-PF party, issued a statement disparaging state violence and the week-long shutdown of internet services as “betray[ing] promises to create a new Zimbabwe”.
Doubts about reform
When President Emmerson Mnangagwa came to power following the removal of President Robert Mugabe in November 2017, hopes for Zimbabwe’s re-engagement and economic turnaround were high.
However, doubts over reform continue to grow, soiling Mnangagwa’s hopes of marketing the country as an attractive investor destination.
At present, Zimbabwe risks being blocked from readmission to the Commonwealth after the UK, initially a key backer of the re-entry of the post-Mugabe regime, withdrew its support citing abuse allegations against the security forces.
The UK’s Africa minister Harriett Baldwin has said that while Britain condemned the riotous behaviour of some protesters, it was “deeply concerned that Zimbabwe’s security forces have acted disproportionately in response”.
The revival of ties with the 53-member bloc could signal an opportunity for the former British colony to re-build investment relations with the international community, but that hangs in the balance as Mnangagwa struggles to convince global powers that Zimbabwe is ready to re-engage.
Most Zimbabwe officials are no longer under the European Union sanctions and travel restrictions imposed in the turbulent decade of the 2000s.
However, in light of the most recent crackdown, sanctions against senior officials are now being reconsidered.
At home, the country is struggling with an economic crisis that has raised the cost of living and spurred inflation. In recent months, inflation has soared to over 40%.
Despite rising doubt, the finance minister, Mthuli Ncube, expects that if a transitional stabilisation programme is fully implemented, Zimbabwe’s inflation could be reduced to a single digit figure before the end of the year.
Local critics are sceptical of Ncube’s austerity plans, which include cutbacks to public spending, tax increments and a planned transition to a local currency.
Economist Vince Musewe told African Business that switching to a local currency was a necessary move, but argues that the government needs to take a more definitive stance on monetary policy.
Robertson said it was imperative for the government to restore confidence in the market and take greater action on promised austerity measures.
“We haven’t seen anything yet that indicates the kind of reforms the government is promising. Before any action can be taken the government has to restore confidence and create channels for forex inflows.”
“The government has to restore trust because right now there’s a lot of distrust and it makes for bad business. The political factor in Zimbabwe’s economy is a constant threat.”
With fuel queues building up again, bread shortages persisting and companies reducing their capacity due to forex shortages, Zimbabwe seems unlikely to salvage itself from a compounding economic crisis.